Archive forJune, 2016

As per GfK, UK consumer confidence remained at -1.0 in June, unchanged from the previous month and better than the market expectation of -2.0. GfK conducted the survey prior to Brexit, and plans to conduct an additional mid-month survey to gauge the impact of UK’s decision to leave the EU.

Chancellor George Osborne has said that Britain would have to increase taxes and cut spending this year to stabilize public finances in the wake of the country’s exit from the EU. Furthermore, he ruled out succeeding Prime Minister David Cameron.

German carmaker Volkswagen has reached a settlement of US$15bn with US car owners after admitting to cheating on emission tests. As per the deal, Volkswagen would offer to repair or buy back the affected diesel vehicles and pay owners compensation. According to news sources, the legal settlement reserves US$10bn to repair or buy back around 475,000 affected vehicles with 2-litre diesel engines and compensate owners with a payment of up to US$10,000.

Credit rating agency Moody’s changed the UK’s credit rating outlook to negative after the country voted to leave the EU. The agency stated that moving out of the EU would have negative impact on the UK’s medium-term growth outlook. The lower rating would lead to higher borrowing costs, which would hamper the government, businesses and households.

Britain has voted to leave the European Union after 43 years. The results of the Brexit referendum held yesterday showed that 51.8% voted in favour of leaving the EU compared with 48.2% that voted for the UK to continue as a part of the bloc. Voter turnout was recorded at 71.8%, or more than 30 million, the highest turnout at a UK election since 1992. London and Scotland voted in favour of staying in the EU; however, this was offset by poor results in the north of England.

Britain will vote on a referendum today on whether the country should leave or exit the EU. About 46,499,537 people will cast their votes, a record number for a UK poll. The results are expected to be announced tomorrow morning.

As per a survey by the Confederation of British Industry, the order balance in the UK rose to -2.0 in June from -8.0 in May, better than the market expectation of -10.0. However, a measure of export orders remained steady at -14.0. Additionally, the agency forecasts factory orders in the three months ahead to improve to +23.

As per data published by Eurostat, construction output fell 0.2% m-o-m in April, after a 1% drop in March, marking the third successive month of decline. On y-o-y basis, construction output slid 0.4% compared with 0.5% increase in March. Production in building decreased 0.4%, while that in civil engineering rose 0.9%.

As per property tracking website Rightmove, house prices in the UK rose 0.8% m-o-m to £310,471 in June, following a 0.4% rise in the previous month. On a y-o-y basis, prices surged 5.5% in June after a 7.8% rise in May. However, prices fell 0.2% in London on impact from a new property tax regime and the upcoming EU vote.

The Monetary Policy Committee of the Bank of England (BoE) voted 9-0 to retain the bank’s benchmark interest rate at 0.5%. The rate has remained at this level for seven years. The committee also voted to maintain quantitative easing at £375bn.

As per the Office for National Statistics, the UK’s unemployment rate fell to 5.0% in the three months to April, its lowest level since the three months to October 2005. The number of unemployed people declined 20,000 to 1.671 million. The number of people in work rose 55,000, with the employment rate remaining at a record high of 74.2%.

As per the Office for National Statistics, the UK’s consumer price index (CPI) remained at 0.3% in May, following a similar reading in April. The CPI remained stable as a rise in transport costs largely offset the decline in clothing and footwear prices. On m-o-m basis, consumer prices rose 0.2% compared with 0.1% in the previous month.

According to Standard & Poor’s (S&P), the European Central Bank (ECB) could reduce the deposit rate further if the US Fed decides to maintain its interest rate. The agency stated ECB’s failure to meet the inflation target may also lead to an interest rate cut. The ECB dropped the deposit rate to -0.4% earlier this year.

According to the Office for National Statistics, the UK’s construction output, which accounts for 6% of the economy, grew 2.5% m-o-m in April after a 3.6% fall in March. This was the highest monthly increase since January 2014. On a y-o-y basis, output fell 3.7% in April after a 4.5% drop in the previous month.

As per data from the Office for National Statistics, trade deficit in the UK narrowed to £3.29bn in April from £3.53bn in March, the lowest since September 2015. This is ascribed to an 11.2% rise in goods export volumes in April, the highest since first being recorded in 1988.

According to the Royal Institution of Chartered Surveyors (RICS), the UK house price balance declined to +19 in May from a revised +39 in April. The decline was due to the uncertainty surrounding the potential for a British exit from the European Union in referendum on 23rd June 2016.

The World Bank reduced its global growth forecast for 2016 to 2.4% from the estimated 2.9% in January. The primary reason for the downgrade was ascribed to low commodity prices, weak demand in major economies and poor business sentiment in advanced economies. Moreover, the bank lowered its growth forecast for 2017 to 2.8% from 3.1%.

As per the British Retail Consortium (BRC), retail spending in the UK rose 1.4% y-o-y in May following a flat reading in the previous month. The increase was ascribed to higher clothes sales. On a like-for-like basis, sales expanded 0.5% in May, compared with a 0.9% fall in April.

As per Markit, the UK’s Purchasing Manager’s Index (PMI) for the services sector increased to 53.5 in May from 52.3 in April, better than the expectation of 52.5. Furthermore, the agency expects subdued economic growth of 0.2% in Q2 2016, mainly due to slowdown in the manufacturing and construction sectors. The vote on Brexit is also negatively impacting consumer confidence.

The ECB upwardly revised the inflation forecast for 2016 to 0.2% from the earlier projection of 0.1%. The bank maintained the inflation projections for 2017 and 2018 at 1.3% and 1.6%, respectively. ECB also raised the growth forecast for 2016 to 1.6% from 1.4%. The projection for 2017 was retained at 1.7%.

According to Nationwide, house prices in the UK rose 0.2% m-o-m in May, following a similar rise in April, but lower than the expected increase of 0.3%. The slowdown in growth was primarily due to a tax surcharge on the purchase of property for rental and second homes. On a y-o-y basis, prices rose 4.7% after increasing 4.9% in April.

As per the British Retail Consortium, shop prices in the UK fell 1.8% y-o-y in May, following a 1.7% decline during the previous month. The decline was primarily due to a 2.7% drop in non-food prices in May and a 0.8% fall in food prices.